Jumpstarting the Mobile Internet

Is social networking the key?

Mobile social networking stands a good chance of jumpstarting mobile Internet adoption because mobile social networking is based more on communication than content. Time and again, communication services have led the way for content and advertising to follow. In the case of the Internet, it was e-mail and discussion boards—not Web pages—that triggered the explosion from early adoption to mainstream consumer use. SMS services drove mobile data use and they still account for the majority of mobile data revenues by carriers.

It is not surprising, therefore, that mobile carriers and mobile content providers have warmed to mobile social networking as a new opportunity to ramp mobile Internet use. In truth, they have little choice. Their attempts to convince the mass market to sign up for mobile Internet have proved moderately successful, at best.

According to February 2008 research by Informa, the global market for all current forms of paid mobile entertainment should reach $31.7 billion by 2012. Back in 2006, the same forecast optimistically predicted $42 billion by 2011.

Juniper Research published a far more bullish outlook for mobile entertainment in January 2008, projecting $64.8 billion worldwide by 2012. Earlier research by Juniper also tried to quantify the revenues associated with mobile user-generated content such as chat room services or mobile dating, predicting $5.7 billion for 2012.

Even with the most upbeat projections, paid mobile content is a tiny market in comparison to revenues from communication-based mobile services. In the US alone, mobile data service revenues (predominantly message-based) reached $23 billion in 2007, according to industry trade group CTIA—The Wireless Association. Mobile messaging for SMS/MMS/IM/e-mail worldwide is expected to be between $100 billion and $200 billion by 2011. When voice traffic is included, the global mobile industry is on track for almost $1 trillion in total revenues by 2012.

The stark reality is that mobile users are more inclined toward communications or task-centric interactions with their mobile device than toward content or entertainment. The UK's Office of Communications study of global mobile markets showed a decided preference by users to engage in mobile data sessions that are communications-oriented rather than information-oriented. Even in Japan, long the poster child for mobile information services, the primary use for the mobile device was e-mail (57% of users) compared to mobile Internet access (20%).

The upshot for mobile carriers and mobile content providers is that they need a new context in which to pitch mobile data access to users. Without a compelling incentive for users to sign up for mobile data access, it is likely that mobile carriers will see their mobile data revenues jump sharply at first and then start to stall at around 30%, as was the case in Japan. Mobile social networking potentially could not only push mobile data access over that hump, but could pull in other communications services to a social networking session.

Mobile content providers also need a relaunch to jumpstart their business. To date, mobile content is generally considered difficult to find as well as inferior in quality to other media channels—a reputation that is somewhat deserved. Mobile social networking offers a new environment for content discovery through recommendation as well as distribution via the network effect.

Will MySpace Revenues Add Up?

The drumbeat of skepticism over social network advertising has gotten louder in recent months. Much of the focus has been on MySpace, the US leader with a 41.5% share of US visits to social networking and community sites in March, according to Hitwise.

IM reorganized its ad sales group in early April, leading to the departure of sales chief Michael Barrett. At the same time, news leaked that FIM might come up $100 million short of achieving the $1-billion fiscal 2008 revenue target set by News Corp. chairman and CEO Rupert Murdoch last June. (News Corp.'s fiscal year ends June 30.)

Financial analysts and the media have assumed that blame for the shortfall lies with MySpace, FIM's flagship, but FIM manages 12 other Internet properties, including IGN, FoxSports.com, RottenTomatoes.com and AmericanIdol.com. AmericanIdol.com will no doubt show strong revenues since the hot TV show is currently on-air. The smaller properties may not have fared as well and could very well take some of the blame.

eMarketer estimated last December that US marketers would spend $850 million to advertise on MySpace in calendar year 2008. Facebook is projected to reach $305 million in US revenue this year.

Even if MySpace does come up short of revenue goals, that should not sound the death knell for social network marketing. The conversation between brands and consumers has only just begun, and the advertising experimentation will continue.

>> Will MySpace Revenues Add Up?

US Online Population

The US Online Population report analyzes the maturing, but still growing, market that is becoming increasing central to both the commercial and cultural pulse of the nation.

Internet usage is becoming a daily habit. US Internet users spent 15.3 hours a week online last year.

eMarketer projects that this year there will be 193.9 million US Internet users, two-thirds of the population. By 2012, 217 million Americans will be online, about 71% of the population.

Those are huge numbers. But by breaking the US Internet population down and focusing on demographics—size, gender, age, race and ethnicity, income and education—this report will help marketers make better targeting decisions.